The Myth That Software Startups Need Or Want Patents
from the the-system-is-broken dept
While I’m not as much in agreement with the crew of folks who likes to separate out “software patents” from the rest of the patent system (the whole system is broken), I can see serious problems with the way that “software” is patented these days. I tend to think that the fix isn’t to carve out software patents, but to fix the whole system itself. Still, if we look at what are generally considered software patents, it does seem clear that they are doing tremendous damage to the industry and innovation as a whole — and thus are very much in violation of the Constitution’s patent clause which only allows for a patent system if it “promotes the progress.” Tim Lee points us to James Besson’s most recent paper, in which he analyzes a generation’s worth of software patents and shows how little most in the software industry actually seem to want patents. In fact, it’s mostly those outside of the industry who obtain software patents.
The report notes, first of all, that historically most software companies don’t actually get patents. Referring to his own earlier research, he notes that, in the 1990s, only 7% of software patents came from software companies, despite the fact that those firms employed 33% of developers. Instead, most software patents were obtained by others. When it comes to startups, even fewer obtain patents. That was in the ’90s, but more recent research backs this up as well. In 2008, only 24% of software companies surveyed held patents, and when asked why, the key reason given was that “patents did not provide important incentives” to startups. That’s all old data, however. The focus of this new paper is on Bessen’s latest findings.
There, he finds that the number of software patents being issued has been growing “dramatically;” much faster than the growth in patents in general. As for the question of software firms obtaining patents? Well, it does show more software companies are getting software patents, but it’s still a minority of such firms. And it’s absolutely true of “startups.” In fact, the study found that a smaller and smaller percentage of startup firms seem to be getting patents these days. If patents really were so “necessary” for startups, as some claim, you wouldn’t see that. Once again, it appears that software patents aren’t actually coming from the real innovators in software:
The large number of software patent grants and the small share of software firms obtaining patents imply that software firms account for relatively little of the activity in software patenting. This intuition is verified in Table 2 which shows that the broad software industry (SIC 737) accounted for only 11 percent of software patent grants to public firms in 1996 and 17 percent in 2006. The prepackaged software industry account for 2.8 percent and 9.8 percent in those years respectively. Thus the software industry still accounts for a small portion of software patent grants, although that portion has increased over the last decade. Most software patents still go to non-software firms.
Moreover, the increase in the share of software patents granted to software firms is largely accounted for by the activity of a small number of large software firms. Table 3 lists the patents granted to the top 10 recipients in the prepackaged software industry for each year. These firms increased their patenting by an order of magnitude and this accounts for most of the increase in patents going to the software industry as shown in Table 2. These few large firms account for most of the software patents granted to the software industry (75 percent and 81 percent in 1996 and 2006 respectively).
To summarize, most software firms still do not patent, although the percentage has increased. And most software patents go to firms outside the software industry, despite the industry?s substantial role in software innovation. While the share of patents going to the software industry has increased, that increase is largely the result of patenting by a few large firms.
But for all those software firms doing the actual innovating… they’re still running into a lot more lawsuits:
the number of lawsuits involving software patents has more than tripled since 1999. This represents a substantial increase in litigation risk and hence a disincentive to invest in innovation.